Final Paper-Addisuu

Business Plan on Gamel Auto Spare Part
UNIT ONE
Executive Summary
Not less than 18% of the global population own at least one vehicle. That translates to over 1.4 billion
vehicles in the world. That is a staggering number of vehicles and the figure keeps growing. Vehicles
constitute several electrical and mechanical aspects. That is why they are always likely to malfunction
or get worn out over time. The average vehicle has approximately 30,000 parts. If we are to look at
substantially big parts or components, that is roughly 1,800 parts. Vehicle ownership has been on the
rise and will continue to be; even multiple vehicle ownership. The other notable dynamic is that
vehicle owners are generally now keeping their vehicles for longer. As such that increases the
likelihood of them needing auto spare parts at some point. That clearly shows you there is money to be
made in starting an auto spare parts store business. Despite whatever the state of the economy might
be in, the demand for auto spare parts will always be high.
Gamel Auto Spare Parts (GASP) is an auto parts store owned by Ato Addisu Shiferaw in Bishoftu
town for more than 15 years. The primary aim of the business is to reduce the hassle of vehicle owners
by providing them best condition spare parts with several quality and price alternatives for their
automobiles. The business will offer a wide range of products & services for the ease of its customers.
Gamel Auto Spare Parts (GASP) is a medium, Bishoftu-based automobile parts wholesale & retail
trade business. GASP was remained as a small and medium scale trade for more than 15 years in order
to offer unprecedented customer attention. GASP is one of the best known Auto parts and auxiliary
sales business in Bishoftu town and become the premier destination for clients in the town.
The location of the project is very attractive and ideal for running such type of business in the town.
The shop occupies all the standards & requirements for sale of its planed products set by the concerned
Governmental authorities and agencies. The business was owned and managed by one of the best
known business persons in the town Ato Addisu Shiferaw who has accumulated adequate experience
in several types of business activities within the country. In addition to this, hired employees will
handle the day to day activities of the outlet. It also creates employment opportunities for 4 residents
of Bishoftu town in different types of employment designation.
GASP plans to become the leading provider of auto spare parts & its outputs & become the best after
sales service provider in the area. This means always having the best and most efficient facilities, sales
outlet and employees. To achieve this, GASP has been investing in many ways that will pay-off in
competitive advantages for its customers. The company's overall strategy will be based on a
continuing improvement process of setting objectives, measuring results, and providing feedback to
facilitate further growth and progress.
This brief survey has been undertaken to assess the technical as well as economic viability of the
business outfit. As subsequent sections of the report reveal; the business will be financially sound
while its socio-economic contributions cannot be neglected.
The promoter of the business can be named as an investor and also an entrepreneur for the town due to
his vision and courage to start this new business before 15 years with its required machineries &
equipments as well as his investment made of multi-use commercial building found in the town.
The total investment cost of the project including its machineries, office furniture’s and equipments
plus the working capital requirement of the business is estimated to Birr 8,272,533.97. It is calculated
based on the assessments made by this study & current market price of auto spare parts, machineries,
furniture’s and equipments. Out of which about 2.24% accounts for Birr 184,948.00 was injected to
the businesses equipments and furniture costs and acquisition of business shop, pre-operating costs of
the business costs 2.27% (187,585.97birr), one Toyota Van was purchased with a total cost of 2.4
million birr that takes 29.01% out of the total investment cost of the business, the remaining balance of
Birr 5.5 million birr (66.49%) will be used for the working capital requirement of the auto spare parts
business.
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The promoter Ato Addisu injects 4,272,533.97 birr (52%) from his own source and expects the
remaining 4,000,000.00 birr (48%) from debt equity for the additional working capital need of his auto
parts wholesale & retail sales business.
To take a broad view, the business is ideally located for the purpose of auto spare parts business, even
though, like most other business ventures, the project aims to maximize its return on invested capital,
however the promoter considers that it also aspires to contribute as an additional gear to the
development of the town, create more job opportunities for the local people and making its own
contribution to the renaissance and development of the country as a whole.
Moreover, in a process of attaining this basic original idea, it also benefits the Municipality as well as
Customs & Revenue office of the town as a means for additional revenue/income through taxation,
VAT and employment income taxes.
It is clear that Ethiopia pursued the free market system and this in turn needs the individuals like that
of the owner of this business to inject their potentials to the economy, as a result the problems that the
nation currently faced will gradually eradicated and the national economy will also become
progressively developed. It is this understanding and courage for this project to be planned and
functional by the promoter Ato Addisu Shiferaw.
This Business Plan is meant to briefly show the project’s importance, area advantages, planned
activities, estimated capital, its profitability and other important aspects for the concerned
stakeholders.
Location
Bishoftu town is one of the well-ordered administrative units located in East Shoa Zone, Oromia
Regional State. The business place is located at Kebele 01 around Zequala area, one of the best sites
for different business types and is convenient for the market.
Application and Business Address
Promoter: Ato Addisu Shiferaw
Name of the Business: Gamel Auto Spare Parts (GASP)
Address: Bishoftu Town, K. 01 Hno. New
Telephone: +251 911 300677
Type of Project: Whole Sale & Retail Trade
Legal form of Business: Sole Proprietorship
Total Capital: 8,272,533.97 birr
Tin No.: 0002291489
Registration Agency: Bishoftu Town Revenue Bureau
Summary of Total Current Investment Costs
Investments made so far
Description Value
Business Buildings 0.00
Vehicle 2,400,000.00
Eqpmt’s, Furniture & Machinery 184,948.00
Working Capital 1,500,000.00
Pre-operating Expenses 187,585.97
Total 4,272,533.97
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UNIT TWO
Introduction
Ethiopian government designed its own development strategy which puts agriculture led
industrialization as a central plan of its development program to take the country’s economy to reach
the middle income countries group.
Following the high target set by Ethiopian Government to expand auto business sector in the country;
several foreign investments have been made in the country. For this reason, government has been
empowering local and foreign companies to engage in production & importing sector of Automobiles
& other types of Vehicles and increase the sector to meet the consumption demand of Automobiles.
According to industry source, Automobile products demand is much greater than the supply sectors
producers & importers; however, a large chunk of this demand goes unsatisfied. Actual consumption,
therefore, is lower than demand because of the tight supplies of quality based Automobiles.
The Current Situation of the Ethiopian Auto Sector
The contribution of Auto Sector to a country's development is high. Its share of contribution to the
GDP of a country is incontrovertible, though the nature and extent of the contribution varies from
country to country. Auto Business Sector plays a big role in what is known in both national and
international trade as invisible trade.
The role of the sector in the investment varies between the developed and the developing countries.
Because a good part of infrastructure development has been taken care of in the developed countries,
most of the investment focuses on automotive equipment & spare parts, whereas the investment in the
developing countries focuses on infrastructure development. Of the total investment expenditure of
developing countries, 60-75% goes to infrastructure development, whereas in the developed countries
the share of expenditure for same is only 35-40%.
Industry Overview
The auto parts stores industry includes stores / shops that retail new and used automotive parts and
accessories, repair automobiles and install automotive accessories. Players in this industry can choose
to operate a single store in just one location or chains of stores in several locations scattered all across
Ethiopia. As a matter of fact, auto spare part stores can be found in all parts of the nations as long as
there are automobiles there.
Several studies projected that the Auto Parts Stores Industry is expected to grow slowly over the last
ten years to the next five years to year 2028. They stated that per capita disposable income and
corporate profit boosted the demand for auto parts. Furthermore, favorable car usage trends have led to
growth in demand for industry products in the short term.
As the national level of per capita disposable income continues to rise, some consumers will increase
their spending on maintaining and fixing their automobile hence the increase in demand for products
and services from the Auto Spare Part Stores industry.
The Auto Parts Stores Industry is indeed a large industry and pretty much active in all the countries of
the world. Statistics has it that in Ethiopia alone, there are about more than thirty five thousand
registered and licensed auto spare parts stores scattered all across the nation responsible for directly
employing about 216,102 people and the industry rakes in a whooping sum of 5.5 billion birr annually.
A close observation of the Auto Parts Stores industry shows that the industry has low barriers to entry.
In Ethiopia, the industry is subject to few restrictive regulations, and industry employees typically do
not need to be trained formally to be able to carry out their duties.
The truth is that, the start–up capital for opening an auto parts stores especially when it involves
establishing a standard auto parts stores with products from various automobile companies and Auto
Spare Part Importers. But if you choose to start a spare part store like the average mom and pop
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business, then you would not have to stress yourself because you will only need minimal start–up
capital to launch the business.
The tough part as it relates to start-up costs most likely are the need to establish a supply of auto parts
from wholesalers or directly from auto parts manufacturing companies. This is so because an auto
parts business cannot be started without sourcing products for sale. Regardless of low barriers to entry,
the competitive nature of the industry makes it very difficult for new operators to break even within a
short period of time in the industry.
Lastly, the auto spare parts industry is pretty much open for aspiring entrepreneurs to launch their
business in the industry. One good thing about auto spare parts stores business is that the business can
be opened in any part of the country with a town or city standard areas and if proper market survey
and feasibility studies are conducted, then you can rule out profitability of the business.
Reasons of this Business Plan
Gamel Auto Spare Parts, with the finance injected from its own source and loan from banks, will be
fully operated with a total capital cost of birr 8,272,533.97. Since its establishment, the project has
been faced major working capital shortages in order to satisfy the purchasing power of its stocks in
sufficient quantity. So due to this, the owner couldn’t develop the business as per his previous plan,
therefore the project needs to request Banks to satisfy the gap of its working capital requirements.
This study can be used for many purposes including:
 How to raise capital from stakeholders
 Applying for a bank loan
 Indicates how the business will run for the future
 Start-up guide to launch branch auto parts store business
 As an auto spare parts store business proposal
 Assessing profitability of the motor spares business
 Finding a business partner
 Shows its Financial Strengths
 Manual for current business owners to help in business and strategy formulation
Company Summary
Why Start an Auto Spare Parts Shop?
For as long as people still use automobile on roads, the need for auto spare parts will continue to be in
high demand. Auto spare parts business is no doubt a profitable business because the replacement of
damaged or worn–out auto parts is compulsory if you want your vehicle to continue to be on the road
and serve the purpose you bought it for.
It is important to point out that auto spare parts business is one of the businesses that can’t go out of
fashion and this is simply because of the role it plays in the auto industry. Depending on the scale you
want to start, the startup capital for this type of business can be considered to be moderate. As a matter
of fact, you can start your own auto spare parts store and then grow it big within a short period of time
by re–investing your profits back to the business.
Hence, Ato Addisu noticed that Bishoftu experiences a lot of traffic, but there are no auto shops or
parts stores located in the area or anywhere between Dukem and Modjo towns before 15 years. Here,
he saw the opportunity to cater to vehicle owners of Bishoftu and the nearby towns. The result was
GASP, an auto parts store that deals with the provision of auto spare parts and its products.
The Market
GASP will be participating in an exciting and growing market. Motor vehicles have seen explosive
growth in the nation, especially in the capital city and major towns and cities like that of Bishoftu,
Adama, Hawassa, Bahir Dar, Dire Dawa, Mekelle and others in the last decade. It is now the fastest-
growing business area in Ethiopia. The market is worth more than 5.5 billion birr annually. A recent
survey indicates that over thirty five thousand people have been involved in the business within the
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country. This is due to the existing nature of the demand increment in utilizing automobiles for
personal as well as business purposes. Additionally, the tendency of observing automobiles as luxury
goods has now been changing with the economical as well as social status and change in the outlook
of the society. Thus, the need for the auto spare parts business has now been growing so promptly.
The Organization
Gamel Auto Spare Parts (GASP) is founded on the idea that maintaining satisfied customers is
essential to the financial health of the business. With this in mind, GASP will be working hard to
ensure that all of its customer’s expectations are exceeded in all transactions. To maintain a presence
within the auto parts business community and close relationships to customers, GASP will be an active
member of the local spare parts market scene through its available quality parts with wide range of
varieties /choices/ in its products.
The Owner
This auto spare part is led by one visionary member who contributes his time, knowledge and capital
to run and make the business profitable by being one of the developmental investors in the town. The
owner Ato Addisu Shiferaw has an ideal mix of educational background, versatile work and business
experience in a wide range of business sectors and activities’. He is fully familiar with the envisaged
project locality area and environment.
Ato Addisu has an educational background on Auto Mechanical Engineering fields from one of the
best technical school found in Addis Ababa (commonly known as Tegbared Technical School) after
which he pursued to several types of businesses in the town for more than two years and had
accumulated his business experience. Then after he left his post to fulfill his lifelong passion of
starting his own store and managed to set up his own auto spare part shop in Bishoftu with small
capital and currently he reached to deal with an 8 million birr capital business.
Additionally, the promoter Ato Addisu has managed to construct a G+4 multi-use commercial
building in one of the best sites of the town.
Therefore he is highly enthusiastic to contribute as a corporate citizen playing socially responsible and
exemplary role as developmental entrepreneur. He is also cognizant of the fact that the auto business
sector has been given much attention by the Government of Ethiopia and will be the mainstay of the
Ethiopian economy for the future, in addition as the main resource of the country, it will contribute the
predominant share of the GDP, foreign currency earnings and is the source of livelihood of the
majority of the population.
Company Goal
The goal of Gamel Auto Spare Part lies on the auto parts whole & retail business sector elevation and
poverty reduction and improving the livelihood of the stakeholders. Create the conditions for
sustainable growth of the sector in Oromiya Regional State, through new technological advancements,
an improved industrial environment, and increased the projects output and maximize its profitability.
Vision Statement
Our vision is to become one of the leading brands in the auto parts stores industry in Bishoftu,
Ethiopia and to establish a one stop auto parts retail store in the town.
Mission Statement
Our mission is to establish a nation – class auto parts retail store business that will make available a
wide range of auto parts from top auto parts manufacturing brands at affordable prices to the residence
of Bishoftu and other surrounding towns where we intend opening of chains of auto parts retail stores
and franchise.
Gamel Auto Spare Parts is dedicated to provide auto part products that combine quality performance
with value pricing. We wish to establish a successful partnership with our customers, our employees,
and our suppliers that respect the interests and goals of each party.
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Constantly striving to supply what the consumer is asking for, we will continually review what is
available in the market place, and what isn’t. Improving on what is available and providing new
products and services to the areas of need will help ensure our success in a market driven by consumer
demand.
Success will ultimately be measured by our customers choosing us because of their belief in our ability
to meet or exceed their expectations of price, service, and selection.
Objectives
The General Objective: To generate improved technologies that contribute to the increased sales and
productivity of auto spare parts and accessories and thereby to bring the country to self-sufficiency,
promote import substitution products, contribute to economic development and poverty reduction,
conservation of integrity of natural resources and the environment.
The Specific Objectives of the Company is to:
 Provide auto parts to its customers that are to the standards attained by well-rated competitors
and contenders;
 Support the development and growth of the national economy through the establishment of
efficient and responsible marketing network for the its products;
 Increase the marketing network of the project through rational use of resources and introduction
of modern and efficient operational systems;
 Create job opportunity in and surrounding the project area;
 Provide stable employment to its workers;
 Generate a return on investment that will allow a reasonable return on capital to the owner as
well as ensure continued growth of the proposed business;
 Opening outlet branches in various areas & regions;
 Contribute revenue to the government in the form of taxes;
 Maximize the income of the owners throughout the project life;
Our Business Structure
GASP does not intend to start an auto parts retail store business like the usual other stores and pop
business around Bishoftu towns; its intention of starting an auto parts retail store business is to build a
standard and one stop auto parts retail store outlet in the town.
Although our auto parts retail store business might not be as big as other high standard auto part
importers and distributors found in Addis Ababa, but will ensure that we put the right structure in
place that will support the kind of growth that we have in mind while setting up the business.
We will ensure that we hire people that are qualified, honest, customer centric and are ready to work to
help us build a prosperous business that will benefit all the stake holders (the owners, workforce, and
customers).
Capital
The total capital investment requirement of the business is birr 8,272,533.97. Out of which (52%)
4,272,533.97 is already injected to the business from the promoters own capital, the remaining (48%)
4 million birr is expected form debt equity. The current capital requirement of the business is
presented in the following chart.
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6,000,000.00
5,000,000.00
4,000,000.00
Total Capital
3,000,000.00
Own Equity
2,000,000.00 Debt Equity
1,000,000.00
-
Furn. & Equip. Vehicle Pre-Oper. Exp. Working Cap.
Products, Service Offering & Delivery
GASP is in the auto parts stores industry to service a wide range of clients and of course to make
profits, which is why it will ensure goes to all the way to make available a wide range of auto parts
from top manufacturing brands in the country and other countries of the world as well as auto part
importers found in Ethiopia.
GASP will be both a satisfactory and demand oriented company serving the local community as well
as offering a wide range of spare parts with an order service. Our product and service offerings are
listed below;
 Auto Engine & Chassis Parts
 Auto Body Parts
 Safety Equipments & Decorations
 Tyre & Battery
 Oil & Lubricants
 Selling Automotive parts and Accessories (critical parts (new), critical parts (used), maintenance
parts, accessories and performance parts)
 Distributing Automotive Parts
 Consultancy Services
 After Sales Services &
 Delivery Services
All of the popular name brands will be offered in addition to an array of generic label parts. GASP will
offer high-grade rating services as well as scaling services to the best grade for clients after sales.
Financials
The previous financial record of GASP shows the profitability of the existing business since its start-
up. For the projected financial records of the business margins are forecasted to be respectable. Year
one sales will be exceptional with a steady growth rate for the next eight years.
GASP is an existing business that combines a customer-centric business with an explosive industry.
Automobile and Vehicle Business is becoming increasingly popular in Ethiopia with more and more
people becoming active participants. Even for those who are not true participants, it is now “cool” to
have your car “tweaked out” even just for aesthetics. An investment made in GASP means a high
growth, profitability and reasonable risk opportunity.
Past financial performance of GASP is depicted on the following table & chart.
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Description Yr 2011 Yr 2012 Yr 2013 Yr 2014

1,951,101.6 2,261,565.6 3,169,908.0 3,232,000.8
Sales 0 0 0 0
Gross Profit 540,651.30 611,470.02 820,818.60 836,577.00
Net Profit 194,996.14 299,016.95 516,513.31 492,652.44
3,500,000.00
3,000,000.00
2,500,000.00
2,000,000.00
Sales
Gross Profit
1,500,000.00 Net Profit
1,000,000.00
500,000.00
-
2011 2012 2013 2014
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UNIT THREE
Market – Demand & Supply Analysis & Strategy
Gamel Auto Spare Part is a standard and registered auto spares parts whole sale & retail store business
that will be located in one of the busiest streets in Bishoftu, Ethiopia.
GASP is involved in selling automotive parts and accessories, distributing automotive parts from
different manufacturers (brands) from Ethiopia and abroad and repairing automobiles. GASP will
ensure that all its customers are given first class treatment whenever they visit its auto parts retail
store.
GASP will at all-time demonstrate its commitment to sustainability, both individually and as a firm, by
actively participating in its communities and integrating sustainable business practices wherever
possible. GASP ensures that it will hold itself accountable to the highest standards by meeting its
customers’ needs precisely and completely whenever they patronize our products.
GASP will cultivate a working environment that provides a human, sustainable approach to earning a
living, and living in our world, for our partners, employees and for our customers.
Market Research
Market research for GASP auto spare parts business is basically 3-tier i.e. Market Identification,
Product Research, and Consumer Research. You can conduct market research by conducting surveys,
observations, interviews, and desk research. Desk research involves gathering and analyzing
information from print and electronic media. The reason why you must conduct market research for
motor spares business is to figure out whether or not a market exists & its profitability. Then if it does
you would want to comprehensively know all its characteristics.
Several Variables to Consider
There are numerous different types of vehicles, brands, and makes. The most populated segment is
light motor vehicles. However, that might not hold true everywhere. Thus you have to zone in on your
intended target market and know its characteristics. All these are examples of variables that call upon
you to conduct market research. What are the most sought after auto spare parts and for which types of
vehicles?
Thus, GASP has a plan to provide several types of Automobiles spare parts to its clients, both original
& used materials in order to satisfy its client’s request.
Location and Premises for an Auto Parts Store
Your choice of location is of critical importance with respect to customer inflows. An appropriate
location must take into account places where there are good road networks and high vehicle traffic.
Your choice must also be done after being absolutely sure that your target area has people with
substantial income levels. It would also be wise to scout your intended location and see whether or not
there are other players active in the same trade. Once you get comprehensive details on that it’ll help
you setup shop in a way that wards off competition.
GASP has chosen its location in Bishoftu town; the town is one of the well-ordered administrative
units located in East Shoa Zone, Oromia Regional State. The business place is located at Kebele 01
around Zequala area, one of the best sites for different business types and is convenient for the market.
Market Trends
If you are conversant with the Auto Parts Stores Industry, you will quite agree that the changes in
disposable income, consumer sentiment, and ever changing trends are major growth drivers for sales
in this industry. No doubt, a massive rise in consumer confidence has also contributed in helping the
industry experience remarkable growth, but uneven performance in these drivers has led to slightly
constrained revenue growth for the industry.
So also, the rising demand for parts manufactured by a third-party manufacturing company, as a result
of increasing disposable income and consumer sentiment, will result in revenue growth, but profit
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margins will stagnate as auto retail stores keep prices low to attract more sales amid growing
competition.
As part of marketing strategies, auto parts retail stores engage in massive clearance sales and discount
sales to attract customers. It is a strategy that helps them welcome new customers and also reinforce
the loyalty of old customers.
Lastly, in recent time, the auto parts retail stores landscape has seen tremendous changes in the last 10
years; it has grown from the smaller outlets to a more organized and far reaching venture. The
introduction of franchise and online store makes it easier for a retailer to reach out to a larger market
far beyond the areas where his physical auto parts retail store is located.
Target Market
Perhaps it will be safe to submit that the auto parts retail stores industry has one of the largest ranges
of customers; almost every automobile owner would have one reason or the other to purchase
automobile parts and accessories.
In view of that, GASP have positioned the auto parts retail store to service the residence of Bishoftu
and every other surrounding towns.
Ato Addisu has conducted his market research and feasibility studies and has an idea of what his target
market would be expecting from him. He is in business to retail a wide range of auto parts to the
following groups of people and corporate organizations;
 Car owners
 Auto repair, maintenance and servicing garages
 Transport companies
 Moving/Shipping companies
 etc
Competitive Advantage
A close study of the auto parts retail stores industry reveals that the market has become much more
intensely competitive over the last decade. As a matter of fact, you have to be highly creative,
customer centric and proactive if you must survive in this industry.
Ato Addisu is aware of the stiffer competition and well prepared to compete favorably with other
leading auto parts retail stores in the town.
GASP is launching a standard one stop auto parts retail store that will indeed become the preferred
choice of residence / automobile owners of Bishoftu and every other location where its outlets will be
opened in future. The auto parts retail store is located close to the largest business as well as residential
estate in Bishoftu around Ziquala localities. The business has enough parking spaces that can
accommodate well over 10 cars per time.
One thing is certain; the promoter will ensure that he has a wide range of auto parts from leading auto
parts manufacturers & importers available in his store at all times. It will be difficult for customers to
visit his auto parts retail store & not see the type of auto parts & accessories they are looking for.
One of our business goals is to make GASP a one stop auto parts retail shop for automobile owners,
auto repair, maintenance and servicing garages & transport companies. Our excellent customer service
culture, various payment options & highly secured facility will serve as a competitive advantage for
the business.
Lastly, our employees will be well taken care of, and their welfare package will be among the best
within our category in the industry meaning that they will be more than willing to build the business
with us and help deliver our set goals and achieve all our aims and objectives. We will also give good
working conditions and commissions to freelance sales agents that we will recruit from time to time.
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Market/Supply & Demand Analysis

Market Segmentation
Personal Vehicle Owners: The primary customers of GASP will be people who own cars for personal
use. As a majority of the population of Bishoftu owns cars, our business will expect these customers to
be quite regular. They are expected to avail maintenance and cleaning services most often.
Private Dealerships: Our second target customer will be private dealerships looking to fix up cars and
sell them. We will provide them with the spare parts and maintenance services required.
Cargo Vehicle Businesses: Due to the vast amounts of construction being carried out in Bishoftu and
surrounding areas, we expect our third most frequent customers to be cargo vehicle businesses looking
for spare parts, maintenance, and cleaning services.
Professional Racers: Our final customer group will be professional racers. They are expected to avail
our spare parts and maintenance services, although not that often.
It is planned to sell 14% of its products to organizations and cargo vehicles owners, 39% will be sold
to individuals and personal owners, 37% will be sold to private dealerships and the reset 10% will be
sold to professionals like that of mechanics and garages.
The potential customers of Gamel Auto Spare Part are predicted to be as follows:
Market Analysis
Mkt
Potential Shar
Customers e Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Personal
Vehicle
Owners 39% 1,620,528 1,787,695 1,972,346 2,176,344 2,401,757 2,650,877 2,926,252 3,230,706
Private
Dealerships 37% 1,537,424 1,696,019 1,871,200 2,064,737 2,278,590 2,514,935 2,776,187 3,065,029
Cargo Vehicle
Businesses 14% 581,728 641,737 708,022 781,252 862,169 951,597 1,050,449 1,159,741
Professional
Racers 10% 415,520 458,383 505,730 558,037 615,835 679,712 750,321 828,386
Total 100% 4,155,201 4,583,834 5,057,298 5,580,370 6,158,351 6,797,121 7,503,209 8,283,862
Competitive Edge
The company seeks to establish a competitive edge in its new target market segments by increasing the
level of customer contact and service that other competitors seem to oftentimes lack. Additionally,
GASP will possess the necessary skills to produce the high quality work that are needed in the
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business. The establishment of the previously mentioned work processes that will ensure greater
service will strengthen the contacts that promote word of mouth marketing and networking.
Competitive Analysis
 We have quick customer care services. We respond to customer queries efficiently.
 We have a fast turnaround time as we take customer orders and requests and fulfill them as soon
as possible.
 We have excellent customer support staff that guides our customers in choosing the best parts for
their vehicle and their budget.
 Through our delivery services, customers can peruse the parts available at the shop or order them
on request.
What Makes the Project (GASP) Different?
The project adopts a state-of-the art design, operational system that has been ensured the products and
services offered surpass the expectations of its clients.
Product Quality: The entire sourcing and purchasing process are designed to ensure the products
supplied meet the various standards and clients’ requirements.
Experts at your Service: The management and professional team comprises of highly experienced
professionals drawn from the market.
Technical Support: The prime objective of the project’s technical support is to help clients specify
the correct product for their cars. Auto part acquisition process, measurement and specification support
also forms an essential link between other industries & factories.
Competency: The auto spare part store and warehouse is equipped with state of art that helps the
project to deliver quality products to its clients. To ensure quality standards, its professionals use high
standard equipment and tools that are specifically designed for the job.
Employees: The Company is managed by professionals, well trained and skilled workforce. These
workers have benefited both the company and our country by conveying their expertise.
Sales and Marketing Strategy
Sources of Income
GASP is in business to trade a wide range of auto parts to the residence of Bishoftu and surrounding
towns, the store is in the auto parts retail stores industry to maximize profits and is going to go all the
way out to ensure that it achieves the business goals and objectives.
In essence, our source of income will be the retailing of a wide range of auto parts from different
manufacturing companies & importers at affordable prices. GASP will generate income by offering
the following products and services;
 Auto Engine & Chassis parts
 Auto Body Parts
 Safety Equipments & Decorations
 Tyre & Battery
 Oil & Lubricants
 Selling automotive parts and accessories (critical parts (new), critical parts (used), maintenance
parts, accessories and performance parts)
 Distributing automotive parts
Sales Strategy & Forecast
One thing is certain when it comes to auto parts retail stores, if your store is well stocked with various
types of auto parts and accessories and your store is centrally positioned, you will always attract
customers, sales and that will sure translate to increase in revenue generation for the business.
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The promoter has been well positioned to take on the available market in Bishoftu and he is quite
optimistic that he will meet his set target of generating enough income / profits from the first three
month of operations and grow the business and his client base.
The main aim of GASP is to become a reliable and trustworthy source of auto parts and after sales
services among its customers. The promoter has been able to critically examine the auto parts retail
stores industry and analyzed his chances in the industry and has been able to come up with the
following sales forecast. The sales projections are based on information gathered on the field and some
assumptions that are peculiar to similar businesses in Bishoftu town and its past sales performance.
The company expects to significantly increase its' clientele every year, for the first 4 years till it
reaches its total sales capacity. The following table shows the projected Sales Forecast for the project:
Items Annual Sales Income
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Sales Capacity 70% 80% 90% 100% 100% 100% 100% 100%
Automobile Parts 1,096,881 1,206,569 1,327,226 1,459,949 1,605,943 1,766,538 1,943,192 2,137,511
Isuzu Parts 980,734 1,078,807 1,186,688 1,305,357 1,435,893 1,579,482 1,737,430 1,911,173
Oil & Lubricants 764,587 841,046 925,150 1,017,665 1,119,432 1,231,375 1,354,513 1,489,964
Tyre & Batteries 598,440 658,284 724,112 796,524 876,176 963,794 1,060,173 1,166,190
Decorations 232,605 255,866 281,452 309,597 340,557 374,613 412,074 453,281
Other Spare Parts 219,688 241,657 265,822 292,405 321,645 353,810 389,191 428,110
After Sales 262,266 301,606 346,847 398,874 458,705 527,511 606,637 697,633
Service
Grand Total 4,155,201 4,583,834 5,057,298 5,580,370 6,158,351 6,797,121 7,503,209 8,283,862
N.B: This projection is done based on what is obtainable in the industry and with the assumption that
there won’t be any major economic meltdown and there won’t be any major competitor retailing same
auto part goods brands and customer care services as we do within same location. Please note that the
above projection might be lower and at the same time it might be higher.
Marketing Strategy
Before choosing a location for GASP, the promoter were conducted a thorough market survey and
feasibility studies in order for him to be able to be able to penetrate the available market and become
the preferred choice for residence of Bishoftu. He has a detailed information and data that he was able
to utilize to structure his business to attract the numbers of customers he want to attract per time.
He hired experts who have good understanding of the auto parts retail stores industry to help him
develop marketing strategies that will help him achieve his business goal of winning a larger
percentage of the available market in the town.
In other to continue to be in business & grow, he must continue to sell the auto parts & accessories that
are available in his store, which is why he will go all out to empower or sales & marketing team to
deliver. In summary, GASP will adopt the following sales & marketing approach to win customers
over;
 Open its auto parts retail store in a grand style
 Introduce our auto parts retail store by sending introductory letters alongside our brochure to
organizations, households, auto repair, maintenance and servicing garages, transport companies
and other key stake holders in Bishoftu
 Ensure that he has a wide range of auto parts and accessories from different brands at all times
 Make use of attractive hand bills to create awareness and also to give direction to his auto parts
retail store
 Position our sign / flexi banners at strategic places around Bishoftu
 Position our greeters to welcome and direct potential customers
 Create a loyalty plan that will enable us reward our regular customers
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 Engage on road shows within our neighborhood to create awareness for our auto parts retail
store.
 List our business and products on news papers & local directories
 Leverage on the internet to promote our business
 Encourage the use of Word of mouth marketing (referrals)
 Join local chambers of commerce and industries to network and market our products
Bridging the Gap
The foregoing analysis made on the demand and supply of auto part products shows that the envisaged
project will hopefully be an additional effort to the country’s overall attempt to increase quality
products so as to help the automobile economic sector of the country as a whole in filling the gap
between the pressing demand and the short supply of quality parts, especially in Bishoftu town. The
envisaged project that will be equipped with advanced and quality auto parts managed by experienced
and reputed professionals; will certainly provide top quality outputs for the sector.
Major Driving Factors for the Growth of Demand of Auto Parts
Ethiopia today has needed high quality auto part distributor and retail stores for different economic
players in the sector, which is related to country’s economic and social development. In recent years,
expenditures for these products are becoming higher and higher.
The following factors are some indicators of the growth for the products demand made by this
business:
 Fastest growing population
 Fast economic growth
 Increasing incomes
 Fast growing social status as well as attitude towards use of personal cars as a necessary for life
 High investment incentives and supporting policies made by the Government of Ethiopia
 Improving infrastructures and so on;
Projected Demand Analysis
Auto spare parts & equipments are therefore one of the most essential accessories for any motor based
economic sector, demand for these products depend on the following important factors:
 Sizes and growth rate of the Ethiopian population and economy
 Growth and development paces various sectors of national economy
 Trends of industrialization and urbanization and
 Access of business community to get loan from banks
The above factors are showing active involvement of private sector in the government’s development
programs in all sectors of the national economy. Growth of agricultural sector, population growth,
construction of industrial estates, residential and non residential housing units are indicative for the
magnitude of demand for auto parts & accessories in the country. Besides, the government has
allocated substantial budgets for manufacturing, agricultural, hydroelectric power generation and
distribution, construction of health and educational institution and offices throughtout the country,
thus, the demand for auto parts & accessories will be increased.
Projected Demand Forecast

Items Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8
Automobile Parts 599 659 725 798 878 966 1,063 1,170
Isuzu Parts 418 460 506 557 613 675 742 816
Oil & Lubricants 198 218 240 264 291 320 352 387
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Tyre & Batteries 88 97 107 118 130 143 157 173

Decorations 173 190 209 230 253 278 306 337
Other Spare Parts 135 149 164 180 198 218 240 264
After Sales Service 123 135 149 164 181 199 219 241
Factors Influencing the Market
 Comparative price realization from the other competitors
 Carryover stocks and serve as per the demand of consumers
 Technological gains through improved facilities and management scheme
 Development of new applications and substitutes of products
Competition and Efficiency
For the market economy to work effectively, competition needs to be on an equal basis so that the
most efficient can survive and the least efficient go out of business. Bankruptcies are not a loss to the
economy, as the assets remain and will be used by others. The threat or reality of bankruptcy is an
essential part of the economic mechanism that leads to efficiency. If efficient organizations cannot
survive and grow because of unequal competition from protected inefficient operators, or from hidden
subsidies to others, then efficiency will not be achieved.
As a general rule current government policies and the tax regime has create an incentive for private
companies to invest in new manufacturing sectors that would lead to greater production & service
efficiency.
In Bishoftu town there are about six Autos spare part dealers like that of Mesi Spare Part, Zufan Spare
Part, Ketema Spare Part & Jittu Spare Parts. So that, the market is still open to the new entrants and
GASP has seen the market opportunity in order to expand its business outlet by having quality motor
parts and accessories.
Publicity and Advertising Strategy
Despite the fact that our auto parts retail store is well located, we will still go ahead to intensify
publicity for the business. We are going to explore all available means to promote our auto parts retail
store.
GASP has a long-term plan of opening outlets in various locations all around Bishoftu & Dukem as
well as Adama which is why we will deliberately build our brand to be well accepted in Bishoftu and
surrounding towns before venturing out.
As a matter of fact, our publicity and advertising strategy is not solely for winning customers over but
to effectively communicate our brand. Here are the platforms we intend leveraging on to promote and
advertise GASP;
 Place adverts on community based newspapers, radio stations and TV stations.
 Encourage the use of word of mouth publicity from our loyal customers
 Ensure that we position our banners and billboards in strategic positions all around the town
 Distribute our fliers and handbills in target areas in and around our neighborhood
 Contact corporate organizations, households, associations and auto repair, maintenance and
servicing garages by calling them up and informing them of GASP and the products we sell
 Advertise our auto parts retail store business in our official website and employ strategies that
will help us pull traffic to the site
 Brand our official vehicle and ensure that all our staff members and management staff wears our
branded shirt or cap at regular intervals.
Pricing Strategy
Aside from quality, pricing is one of the key factors that gives leverage to auto parts retail stores, it is
normal for consumers to go to places (auto parts retail outlets) where they can get auto parts and
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accessories at cheaper prices which is why big player in the auto parts stores industry will attract loads
of corporate and individual clients.
We know we don’t have the capacity to compete with the producers & importers of auto parts in
relation to price but we will ensure that the prices & quality of all the auto parts & accessories that are
available in our store are competitive with what is obtainable amongst auto parts stores within our
level.
As stated above, most of our materials used for resale are products which are imported from abroad &
manufactured in local economy for auto parts & repairs. Moreover, the CIF prices of imports for these
products cannot be traced for the Annual External Trade Statistics of the customs Authority does not
show the quantity of imports of the items in question separately but in aggregation.
Furthermore, prices, given by dealers of spare parts for the products of interest show a wide
fluctuation from one dealer to another, rendering price quotations from such dealers unreliable.
 In spite of this fact, the somewhat common selling prices of the projects output types have been
found out and sales revenue will be expected to rise by 10% every year.
 After sales repair & maintenance service income is expected to be also 15% of the total income
generated from annual sales income.
 Direct material costs are estimated at 64% of total sales income.
Sales Forecast
Units Sold Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Automobile Parts 599 659 725 798 878 966 1,063 1,170
Isuzu Parts 418 460 506 557 613 675 742 816
Oil & Lubricants 198 218 240 264 291 320 352 387
Tyre & Batteries 88 97 107 118 130 143 157 173
Decorations 173 190 209 230 253 278 306 337
Other Spare Parts 135 149 164 180 198 218 240 264
After Sales
Service 123 135 149 164 181 199 219 241
Unit Prices Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Automobile Parts 1,831 1,831 1,831 1,830 1,829 1,829 1,828 1,827
Isuzu Parts 2,346 2,345 2,345 2,344 2,342 2,340 2,342 2,342
Oil & Lubricants 3,862 3,858 3,855 3,855 3,847 3,848 3,848 3,850
Tyre & Batteries 6,800 6,786 6,767 6,750 6,740 6,740 6,753 6,741
Decorations 1,345 1,347 1,347 1,346 1,346 1,348 1,347 1,345
After Sales
Service 2,132 2,234 2,328 2,432 2,534 2,651 2,770 2,895
Sales Income Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Automobile Parts 1,096,881 1,206,569 1,327,226 1,459,949 1,605,943 1,766,538 1,943,192 2,137,511
Isuzu Parts 980,734 1,078,807 1,186,688 1,305,357 1,435,893 1,579,482 1,737,430 1,911,173
Oil & Lubricants 764,587 841,046 925,150 1,017,665 1,119,432 1,231,375 1,354,513 1,489,964
Tyre & Batteries 598,440 658,284 724,112 796,524 876,176 963,794 1,060,173 1,166,190
Decorations 232,605 255,866 281,452 309,597 340,557 374,613 412,074 453,281
After Sales
Service 262,266 301,606 346,847 398,874 458,705 527,511 606,637 697,633
Total Sales 4,155,201 4,583,834 5,057,298 5,580,370 6,158,351 6,797,121 7,503,209 8,283,862
Payment Options
The payment policy adopted by GASP is all inclusive because we are quite aware that different
customers prefer different payment options as it suits them but at the same time, we will ensure that
we abide by the financial rules and regulation of the Region as well as the Nation.
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Here are the payment options that GASP will make available to its clients;
 Payment via bank transfer
 Payment with cash
 Payment via debit cards / Point of Sale Machines (POS Machines)
 Payment via online bank transfer
 Payment via check
 Payment via mobile money transfer
In view of the above, we have chosen banking platforms that will enable our client make payment for
the purchase of auto parts and accessories without any stress on their part. Our bank account numbers
will be made available on our website and promotional materials to clients who may want to deposit
cash or make online transfer for our products and services.
Sustainability and Expansion Strategy
The future of a business lies in the numbers of loyal customers that they have; the capacity and
competence of the employees; their investment strategy and the business structure. If all of these
factors are missing from a business (company), then it won’t be too long before the business close
shop.
One of our major goals of starting GASP is to build a business that will survive off its own cash flow
without the need for injecting finance from external sources once the business is officially running.
We know that one of the ways of gaining approval and winning customers over is to retail our wide
range of quality auto parts and accessories a little bit cheaper than what is obtainable in the market and
we are well prepared to survive on lower profit margin for a while.
GASP will make sure that the right foundation, structures and processes are put in place to ensure that
our staff welfare is well taken-of. Our business’s corporate culture is designed to drive our business to
greater heights and training and re–training of our workforce is at the top burner.
We know that if that is put in place, we will be able to successfully hire and retain the best hands we
can get in the industry; they will be more committed to help us build the business of our dreams.
Future Development & Exit Strategies
Every business undertakings be it large or small should have to have future development plan. It is a
plain fact that business activities are undertaken in a dynamic and turbulent environment. Hence to
overcome or minimize the risks of uncertain future business risks, every project should devise
effective strategies that enable them to be successful in their operation & lifetimes. Likewise the
envisaged project has devised strategies to overcome the future risk of operation.
 The first strategy is diversification of its activities to different other business forms.
 The second future development plan of the project is expanding its branches in many other parts
of the country.
 The third strategy of the project is making a joint venture with other similar business
undertakings either from domestic or foreign partners from abroad.
 The final strategy of the project is selling the whole project to other interested organizations or
individuals.
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UNIT FOUR
Justification of the Project
Statement of Understanding: Gamel Auto Spare Part confirms that it will fully understand and will
adhere to the requirements of the technical specification and all design and standards referenced or
otherwise applicable.
Key Success Factors
The three main critical success factors that affect the decision to invest in the proposed business setup
are:
Hands on Experience: Having a thorough knowledge and hands on experience of all the relevant
technical details is a must for entry into this type of business sectors. Relevant work experience is the
most important pre-requisite because it has a direct impact on the successful management of the
business. The GM Ato Addisu Shiferaw has ample work & educational experience for doing the
business successfully.
Marketing Skills: Another critical factor is that the entrepreneur must have effective PR and
marketing skills. These marketing skills should enable the entrepreneurs to carry out business
development activities to target its potential customers and also to maintain its existing client base.
Technical Skills: The third critical factor relates mostly to technical skills required especially for
operating computerized and manual machineries and equipments. The technical staffs should be
properly trained in order to completely inspect the auto parts, take exact measurements, and serve to
clients or advice clients with their auto part demands. In case of unskilled workers handling these
cases, there will be loss of time, equipment and most important of all unsatisfactory product will lead
to customer dissatisfaction and total loss.
 Good knowledge of project management
 Deliver various auto spare parts promptly
 Quality product care with competitive fair price
 Using highly experienced and professional work forces to penetrate the market and wins its
competition easily
 Access to credit
 Maintaining a reputable and untarnished reputation in the community
 Flexible hours
Infrastructure and Premises
The project area is planned to be selected in Oromia Regional Government, East Shoa Zone, Bishoftu
town in which public utilities and services such as electric power, telecommunication, water supply,
schools, health institution, financial institutions, required man power and other inputs are sufficiently
available relatively to other zones.
Anticipated Source of Business: Different small, medium & large scale auto part stores are the main
source for marketing and advertizing the businesses output; since the business was found in near
distance to the center of the town. In the retail store the promoter of the business has sufficient
contacts and good referral network for marketing his products.
Accessibility of Sublet Services: Most auto spare part stores do not offer all the services hence some
services are outsourced to other specialized workshops/personnel (Garages). Quick and easy
accessibility to these services would minimize job turnaround time thus the location needs to be in
close proximity to these service providers.
Existing Competition: Concentration of similar types of stores will give difficult competition, which
increases if the competitors are well established and famous for their products and services. Therefore
it is advisable to choose such locations only when the owner is expected to have considerable amount
contacts and referrals.
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Quick Accessibility to Parts Market: Maintaining a spare parts inventory is crucial for reducing the
job turnaround time. However many entrepreneurs and other workshops prefer to be located within
close proximity to the spare parts market to ensure ready availability of desired spare parts. Therefore
less money is tied up in maintain an adequate spare parts inventory.
Access to Credit: The auto spare part store business requires high working capital investment. The
reason is that a large sum of money is incurred to cover cost of several types of auto parts with high
quality and quantity to several types of automobiles and other vehicles. Since the cost of inventory in
the country is relatively high and hardly affordable to most of business owner’s, access to credit can
play important role in increasing the marketable supply of the project. Therefore, among other things,
credit is assumed to have positive contribution to the sector.
Furniture’s & Equipment
Machinery and equipments acquired for the business process is given in next tables. The total
investment cost of the furniture and equipment is estimated at birr 184,948.00.
Sr. Description UoM Qt Unit Price Total Total
No. y Price Price
(Birr) (Birr) (USD)
1 Office Table Pcs 1 4,500.00 4,500.00 83.33
2 Office Chair Pcs 1 3,800.00 3,800.00 70.37
3 Shelf Pcs 3 24,580.00 73,740.00 1,365.56
4 Balcony Pcs 1 8,500.00 8,500.00 157.41
5 Laptop Pcs 1 26,000.00 26,000.00 481.48
7 Filing Cabinets Pcs 2 5,900.00 11,800.00 218.52
8 Guest Chairs Pcs 6 1,700.00 10,200.00 188.89
9 TV set Set 1 16,000.00 16,000.00 296.30
10 Tools & Kits Set 1 8,950.00 8,950.00 165.74
11 Other Machinery & Equipments Set 1 21,458.00 21,458.00 397.37
Grand Total 121,388.00 184,948.00 3,424.96
Vehicle
One Toyota Van is purchased and used for transportation for the business with a total cost of birr
2,400,000.00.
Sr. Description Unit of Qty Unit Price Total Price Total Price
No. Measure (Birr) (Birr) (USD)
1 Toyota Van Pcs 1 2,400,000.00 2,400,000.00 44,444.44
Grand Total 2,400,000.00 2,400,000.00 44,444.44
Inventory Management
For GASP business this is best done using a digital solution. There is countless inventory management
software you can purchase or be licensed to use. The ideal one should allow you to manage inventory,
manage orders, manage bills, manage customer accounts, and more. This should all be doable from a
centralized system that provides accurate real-time data. So that GASP has been used its inventory
management system using Ms-Excel programme.
Basis & Presumptions
 The project is expected to work at 70% sales efficiency for the first operational year.
 The full capacity utilization will be achieved in four years. 70% in the first year followed by 80%
& 90% in the next two years respectively and the 100% in subsequent years.
 The expenditure of pre-operational costs, legal charges, cost of furniture and equipment,
materials and consumables other expenses etc. initiated in the profile are based on the prices
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prevailing at the time of project start-up. Therefore, they are subject to necessary changes from
time to time based on local conditions.
Implementation Schedule
Activities Period Till
Preparation of project document, registration & other clearance January 2023
Bank Loan Processing Jan. – Feb. 2023
Completion of Bank Loan Jan. – Feb. 2023
Purchase of Furniture and Equipments Jan. – Feb. 2023
Purchase of Inventory February 2023
Recruitment of Employees February 2023
Economical, Environmental & Social Impacts
The envisaged project deemed to contribute to the economic development of the nation in general and
the region in specific in the following ways:
Supply of Quality Auto Parts: The business under discussion will provide quality & fair priced auto
parts for local market. This will benefit the users to get better product with affordable price & long
durability.
Value-add: The establishment of this business will add a value to the auto parts sector in specific and
to the economy in general.
Source of Revenue: As public policy of any nation, the government collects different forms of taxes
from different business organizations and individuals. Among the different forms of taxes, business
income taxes, VAT and payroll taxes are collected from undertaking business activities. Therefore, the
business will serve as sources of revenue for both regional and federal governments.
Employment Opportunity: One of the problems that our country faced is unemployment. Therefore,
the current objective of the government is working on tackling the problem of unemployment and
fostering the development process either through creating self employment or employment in other
organization. Hence, this business will hire 6 - 10 employees permanently.
Save the Country’s Foreign Exchange: By minimizing the market gab between the demand &
supply for its final outputs from local producers, the project will lend a hand to reduce the nation’s
foreign exchange cost to import these auto parts. This will save the foreign exchange resource of the
nation.
Benefit for the Local Community: As a communal responsibility, the project will engage in different
developmental activities on the surrounding areas (Bishoftu town). This enhances community
participation on the surrounding development and the region.
Stimulate the Local and National Economy: This project has positive externality in the town that
will encourage the economic movement of regional economy. Hence, there will be an economic
relationship and transactions among different actors.
Developmental Impact of the Project in Socio-economic
Given the multi-sectoral nature of the motor economic sector in Ethiopia and as a major gear to
enhance the renaissance and transformation of the country, a valuable impact will be create since
every economic sector needs sufficient supply of credit facilities, land, infrastructures, electric power
as well as transportation services.
The project will help the sector to minimize the current market price of auto parts if it is assisted by
banks and related parties to extensive involvement of providing quality auto parts with high quality
and quantity. Help for the foreign exchange earner of the country. As a whole it will have significant
socio-economic developmental impact for several types of stakeholders.
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 The hygiene of the employees /both clerical and non clerical/, the type of outputs and rendered to
the domestic market will be keep up based on the standards and directives stated by Ministry of
Health & Ethiopian Standards Agency
 There will be no environmental pollutions affecting the area with relation to the proposed project
 The Eco system of the area will not be degraded by the project work
SWOT Analysis
The intention of starting just one outlet of the auto parts retail store in Bishoftu is to test run the
business for a period of 2 to 5 years to know if the promoter will invest more money, expand the
business and then open other outlets all over major towns in the region as well as the country.
The promoter, Ato Addisu has been quite aware that there are several auto parts retail stores all over
the town and even in the same location where he intend locating his business, which is why he follow
the due process of establishing a business. He knows that if a proper SWOT analysis is conducted for
his business, he will be able to position his business to maximize its strength, leverage on the
opportunities that will be available to him, mitigate his risks and be welled equipped to confront his
threats.
GASP employed the services of an expert and Business Analyst without bias in retailing to help him
conduct a thorough SWOT analysis and to help him create a business model that will help and achieve
his business goals and objectives.
This is the summary of the SWOT analysis that was conducted for Gamel Auto Spare Parts;
Strength:
Its location, the business operating on both (retail store and warehouse), varieties of payment options,
wide range of auto parts from different manufacturing brands both from Ethiopia and abroad and his
excellent customer service culture will definitely count as a strong strength for GASP. So also, our
team of highly qualify staff members is also a plus for the business.
 The existing promising market for auto parts & products
 Availability of skilled labor force for the project
 Geographical location of the project area
 Bishoftu is a busy town having a connection with different major towns and peasant associations
Weakness:
A major weakness that may count against GASP is the fact that the financial capacity to compete with
multi – million birr capital auto parts retail store outlets when it comes to retailing at a rock bottom
prices for all their auto parts.
Opportunities:
The fact that GASP is going to be operating its auto parts retail store close to one of the largest
business & residential estates in Bishoftu provides the business with unlimited opportunities to sell its
auto parts to a large number of individuals, auto repair, services and maintenance garages and
transport companies. GASP has been able to conduct thorough feasibility studies and market survey
and identifies who are the potential clients that will be looking for when they visit the auto parts store
outlets; we are well positioned to take on the opportunities that will come to the way of GASP.
 Existence of good policy environment for investment
 Government incentive for investment
 Existence of high demand for improved and equipped modernized auto parts & components
 Availability of professionals around project area
 Premium prices can be obtained by providing quality product
Threat:
Just like any other business, one of the major threats that may face is economic downturn. It is a reality
that economic downturn affects purchasing / spending power. Another threat that may likely confront
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us is the arrival of a new auto parts retail outlet in same location where ours is located. So also,
unfavorable government policies may also pose a threat for businesses such as ours.
 Government policies and procedures may be could be characterized as a threat
 Market share competitors in the region as well as in the country
Mitigation Plans
 Support the business with additional business opportunities and services
 Accustomed the business with the policy changes
 Fulfilling the required government regulations
 Revising the business strategies frequently
 Forecasting the future trends and making necessary arrangements to cope with change
Management Review
The company's management philosophy will be based on responsibility and mutual respect. GASP will
maintain an environment and structure that will encourage productivity and respect for customers and
fellow employees.
GASP will be responsible to its employees, the men and women who work with the company.
Everyone will be considered as an individual and the company will respect their dignity and recognize
their merit. Employees will be encouraged to have a sense of security and pride in their jobs.
Additionally, employees will be free to make suggestions and complaints. The company will afford
equal opportunity for employment, development, and advancement for those qualified.
GASP employees will be committed to:
 Providing a safe work environment to protect employees, the employees of customers and
subcontractors, and the public.
 Supplying safe products for customers.
 Continuously improving the company's safety program to reduce the risk of accidents and
occupational illness in a changing work environment.
 Encouraging employees to participate in accident prevention programs and take personal
responsibility for their own and their co-workers' health and safety.
 Regulatory compliance and contribution to high safety standards for its industry.
 Monitoring workplaces, enforcing safe work practices, and communicating the company's safety
performance to employees and other stakeholders.
 Making safety a value-added service that the company provides to its customers.
Organization and Manpower
Both skilled and unskilled manpower is required to effect on implementation of the proposed business.
To make the project effective and efficient having competent management practice and prompt
decision making is essential. The planning, coordinating, directing and supervision of the project will
be the responsibility of the General Manager who is an educated and experienced person in different
field of business areas (Ato Addisu Shiferaw). Relevant staff and workers will be employed to assist
the GM on permanent and casual terms.
The proposed project, therefore, will not face any management and organizational risks based on its
staff base. Besides its creation of vast employment opportunity during its construction phase face for
both daily laborers and professionals, the project will create permanent employment opportunity for
about 6 citizens, with the annual salary of 164,400.00 birr.
The project will have:

 Proper organizational structure which lay down the authority and reporting line of operational
and functional units;
 Management job descriptions that describe the role, responsibility and accountability of
management members;
22
 Job descriptions for the staff to serve as basis for personnel actions; to fix responsibility and
accountability, to investigate disciplinary offences and arrive at judicious conclusions;
 A classification and pay system to determine salary and benefits, to rate performance;
 Better data management systems - computerized financial management and maintenance
management system; and
Description Number Monthly Annual Educational Year of
Salary Salary Background Experience
General Manager 1 4,000 48,000 BA Degree 4 Years
Sales Man 1 2,500 30,000 Diploma 2 Years
Accountant 1 2,500 30,000 BA Degree 2 Years
Store Keeper 1 2,000 24,000 Diploma 2 Years
Cleaner 1 1,200 14,400 8+ 1 Year
Guard 1 1,500 18,000 8+ 1 Year
Grand Total 6 13,700 164,400
Salary will increase by 5% for permanent employees every year. The remaining details will be
explained in Financial Analysis section of this study.
Training Requirement
As much as possible skilled employees will get on-the-job trainings on effective utilization of
machineries, office equipments, office management and customer handling trainings. Besides to that
every three months there will be a market expansion discussions and meetings between the staffs and
the management team in order to widen the performance of the project as a whole.
Organizational Charts by Facility
General Manager
Sales Person Accountant Store Keeper Non-Clericals
23
UNIT FIVE
Financial Projections & Analysis
Important Assumptions: GASP is assuming steady growth from good management, barring any
unforeseen local, national or international disasters such as the economic slowdown seen by most of
foreign countries found in Europe & Asia following the economic crash.
GASP is assuming adequate grant funding to sustain the company during start-up from
commercial/private banks found in Ethiopia.
The financial analysis of the project is based on the data provided in the previous chapters and the
following assumptions:
 Construction Period -
 Source of Finance 52% own equity
48% debt equity
 Tax Holidays 0 years
 Bank Interest 16.5%
 Loan Period 8 Years
 Insurance Expense 0.15% of Fixed Assets
 Repair & Maintenance 0.74% of Fixed Assets
 Depreciation Expense 20% for Machineries & Equip., & 5% for Buildings
 Accounts Receivable 30 days
 Work in Progress 300 days
 Raw Material (Perishable) -
 Raw Material (Non Perishable) -
 Cash in Hand 5 days
 Accounts Payable 30 days
Capital Breakdowns
The capital resource is a prime resource for undertaking any activities. Hence, the total budget to
implement this project is estimated at 8,272,533.97birr. Out of the total budget of the project 52%
(4,272,533.97) birr will be covered from the promoters own resource, whereas the remaining 48%
(4,000,000.00) birr will be covered as a form of debt equity from financial institutions.
Owners Equity Debt Equity %
Items to be Purchased Total Cost (52%) (48%) Share
Buildings - - - -
Furniture & Equipment 184,948.00 184,948.00 - 2.24
Vehicles 2,400,000.00 2,400,000.00 - 29.01
Pre-production Cost 187,585.97 187,585.97 - 2.27
Working Cap. + Contingency 5,500,000.00 1,500,000.00 4,000,000.00 66.49
Total Investment Cost 8,272,533.97 4,272,533.97 4,000,000.00 100.00
Loan Request
 The credit requirement that the promoter of this project presented to the bank is 4,000,000.00
that can be repaid back within the next 8 years including all the interest and related charges.
 The repayment will be made monthly due to the nature of the business.
 The requested loan amount will be fully (100%) utilized for working capital need of the project.
Loan Repayment Schedule
 The banks are assumed to charge an interest rate for the term loans which lasts for eight years is
16.5% per year as per the present scenario.
24
 Hence the requested project financing loan will be paid within the scheduled period through
monthly repayment amount of 75,295.88 that leads to an annual repayment amount of
903,550.56. The related interest charges and principal payments are presented below.
Years Annual Interest Principal Outstanding Loan
Repayment Payment Payment Balance
0 - - - 4,000,000.00
1 903,550.56 640,710.61 262,839.95 3,737,160.05
2 903,550.56 593,907.19 309,643.37 3,427,516.67
3 903,550.56 538,769.57 364,780.99 3,062,735.69
4 903,550.56 473,813.70 429,736.86 2,632,998.83
5 903,550.56 397,291.27 506,259.29 2,126,739.54
6 903,550.56 307,142.62 596,407.94 1,530,331.60
7 903,550.56 200,941.38 702,609.18 827,722.42
8 903,550.56 75,828.14 827,722.42 0.00
Total 7,228,404.48 3,228,404.48 4,000,000.00 0.00
Fixed Investment Costs
Fixed investment costs of GASP includes machinery costs, different equipment costs and a cost
incurred for purchase of Toyota Van, while annual operating cost (working capital requirement)
includes the costs that will be expended within one year for the operation of the business to cover
running cost of the whole project including purchase of direct materials used for resale.
The project has one sales outlet in Bishoftu town & one store found in kebele 01, the shop is equipped
with all the necessary equipments and furniture’s used for the day to day activity of the business. As
per the current assessment of this study & concerned professional persons the total cost of the business
is calculated as 8,272,533.97 birr, out of which furniture & equipments cost birr 189,948.00 (2.24%),
the vehicle costs birr 2,400,000.00 (29.01%), pre-operating expenditures cost birr 187,585.97 (2.27%),
the remaining cost of the projects is a working capital cost of 5,500,000.00 (66.49%).
No Fixed Investments m2 Total Cost
1 Construction Cost - 0.00
Sub Total 0.00
2 Pre-operating Costs - 187,585.97
3 Equipments, Furniture’s & Fixtures - 184,948.00
4 Vehicle - 2,400,000.00
5 Working Capital + Contingency - 5,500,000.00
Sub Total 8,272,533.97
Grand Total - 8,272,533.97
N.B: Pre-Operation expenditure includes interest during start-up, costs of registration, licensing and
formation of the company including legal fees, commissioning expenses & feasibility studies etc.
Annual Revenue Projection
The revenue of the project is expected to be generated from two sources, the main source of the
business lies on sales of auto spare parts and other revenue will be generated from after sales repair
and maintenance service of the shop.
Based on the previous financial assessments & estimation of the projects sales & pricing plan; the
project will generate a total of 3,892,935.00 birr from sales of its products on 1 st year, in addition to
that after sales repair & maintenance service revenue will be birr 262,266.00. The total revenue
estimation tables are indicated below:
Revenue Generated from Sales & after sales Services
Items Annual Sales Income
25
Yr 2014 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Sales Capacity 70% 80% 90% 100% 100% 100% 100% 100%
Automobile Parts 906,255 1,096,881 1,206,569 1,327,226 1,459,949 1,605,943 1,766,538 1,943,192 2,137,511
Isuzu Parts 755,213 980,734 1,078,807 1,186,688 1,305,357 1,435,893 1,579,482 1,737,430 1,911,173
Oil & Lubricants 604,170 764,587 841,046 925,150 1,017,665 1,119,432 1,231,375 1,354,513 1,489,964
Tyre & Batteries 453,128 598,440 658,284 724,112 796,524 876,176 963,794 1,060,173 1,166,190
Decorations 211,460 232,605 255,866 281,452 309,597 340,557 374,613 412,074 453,281
Other Spare Parts 90,626 219,688 241,657 265,822 292,405 321,645 353,810 389,191 428,110
After Sales 211,151 262,266 301,606 346,847 398,874 458,705 527,511 606,637 697,633
Service
Grand Total 3,232,001 4,155,201 4,583,834 5,057,298 5,580,370 6,158,351 6,797,121 7,503,209 8,283,862
Projected Total Revenue Table
Summary of Annual Revenue
Year Yr 2014 1 2 3 4 5 6 7 8
3,020,85 4,710,45 6,896,57
Sales Income 0 3,892,935 4,282,229 1 5,181,496 5,699,646 6,269,611 2 7,586,229
Service Income 211,151 262,266 301,606 346,847 398,874 458,705 527,511 606,637 697,633
3,232,00 5,057,29 7,503,20
Total Revenue 1 4,155,201 4,583,834 8 5,580,370 6,158,351 6,797,121 9 8,283,862
Associated Costs and Expenses
Utilities Expense: The major essential utilities required for the envisaged project are electricity, water,
internet and telephone lines. Utility expenses are assumed to increase by 5% annually.
Project Years
Expense Item Year 2014 1 2 3 4 5 6 7 8
Utility Expense 5,827 6,119 6,425 6,746 7,083 7,437 7,809 8,200 8,610
Supplies Expense: Birr 5,192.00 for the 1st year will be spent for different types of stationeries &
printing expenses & other type of supplies expenses. Then after it will have an annual increment of
5%.
Project Years
Year
Expense Item 2014 1 2 3 4 5 6 7 8
Supplies Expense 4,945 5,192 5,452 5,725 6,011 6,311 6,627 6,958 7,306
Insurance Expense: Is expected to be 0.15% of the value of total fixed assets owned by GASP.
3,877.42 is assumed as an annual insurance expense of the project (2,584,948.00 * 0.15% = 3,877.42).
Repair & Maintenance Expense: is estimated to be 0.74% of the projects fixed asset, which will be
birr 19,128.62 per annum (2,584,948.00 * 0.74% = 19,128.62).
Depreciation Expense: Fixed assets of the project will have their proportional depreciation expenses
as per the following determination.
Fixed Assets Original Value Dep. Rate Annual Depreciation
Buildings 0.00 5% 0.00
Machineries, Equipments & Furniture’s 184,948.00 20% 36,989.60
Vehicle 2,400,000.00 20% 480,000.00
Total 2,584,948.00 516,989.60
Fuel & Lubricants Expenses: includes expenses incurred for fuel, gas, oil change for the vehicle and
lubricants as well as service expense. Per annum 29,038 birr will be expected to be spent for fuel & oil
changes & will have an increment of 5% yearly.
Expense Item Project Years
Year 1 2 3 4 5 6 7 8
26
2014
Fuel & Oil Expense 29,03 30,49 37,06
27,655 8 0 32,014 33,615 35,296 0 38,913 40,859
Wage Expenses: includes expenses paid for loading and unloading as well as daily labor expense with
an increment of 5% yearly.
Project Years
Year
Expense Item 2014 1 2 3 4 5 6 7 8
Wage Expense 13,29 14,65 15,38 16,96 17,81
12,658 1 13,955 3 6 16,155 3 1 18,702
Cleaning Materials Expenses: includes expenses paid for sanitary materials and cleaning expenses
with an increment of 5% yearly.
Project Years
Year
Expense Item 2014 1 2 3 4 5 6 7 8
Cleaning Materials Expense 6,895 7,239 7,601 7,982 8,381 8,800 9,240 9,702 10,187
Rent Expenses: includes expenses paid for store rent expense paid per year with an increment of 5%
yearly.
Project Years
Expense Year
Item 2014 1 2 3 4 5 6 7 8
Rent Expense 90,72 105,02 115,78 127,65
86,400 0 95,256 100,019 0 110,271 4 121,573 2
Miscellaneous Expenses: includes expenses incurred for transportation, legal fees, advertisement and
other expenses used for the project. Per annum 22,463.00 birr will be expected to be spent for
miscellaneous reasons and it will have an increment of 5% yearly.
Project Years
Year
Expense Item 2014 1 2 3 4 5 6 7 8
Miscellaneous Expense 22,46 23,58 24,76 27,30 28,66
21,393 3 6 6 26,004 4 9 30,103 31,608
Manpower Requirement: The total permanent manpower requirement will be 6; the list of the
manpower requirement is presented above along with monthly and annual salaries expense. Salary will
be higher than before by 5% for permanent employees every year.
Project Years
Year
Expense Item 2014 1 2 3 4 5 6 7 8
Salary 164,40 181,25 199,82 220,31
Expense 33,600 0 172,620 1 190,314 9 209,821 2 231,327
Projected Total Operational Costs: Hence, the operational cost at almost full capacity of the plant
for one year is estimated at Birr 397,615.00 including contingency for the year. The utility cost
accounts for 1.5% while repair and maintenance take 4.8% of the total operational cost, supplies
expense will cover 1.3%, miscellaneous expenses are also take 5.6% of the total operational cost
needed for the project, fuel expense has 7.3%, wage & labor cost has 3.3%, cleaning materials has a
1.8% & shop rent has 22.8% coverage out of the total operational cost of the business.
Out of the total operational cost of the project salary & wage expense covers 41.3% in addition to that
insurance expense accounts for 1% of the cost, contingency takes 9.1% of the total cost budget.
Projected Total Cost Table
Cost Items Project Year
Yr 1 2 3 4 5 6 7 8
27
2014
Utility Exp. 5,827 6,119 6,425 6,746 7,083 7,437 7,809 8,200 8,610
Supplies Exp. 4,945 5,192 5,452 5,725 6,011 6,311 6,627 6,958 7,306
Insurance Exp. 3,877 3,877 3,877 3,877 3,877 3,877 3,877 3,877 3,877
Fuel & Oil Exp. 27,655 29,038 30,490 32,014 33,615 35,296 37,060 38,913 40,859
Wage Exp. 12,658 13,291 13,955 14,653 15,386 16,155 16,963 17,811 18,702
Cleaning Exp. 6,895 7,239 7,601 7,982 8,381 8,800 9,240 9,702 10,187
Rent Exp. 86,400 90,720 95,256 100,019 105,020 110,271 115,784 121,573 127,652
Salary Exp. 33,600 164,400 172,620 181,251 190,314 199,829 209,821 220,312 231,327
Repair & Main. Exp. 19,129 19,129 19,129 19,129 19,129 19,129 19,129 19,129 19,129
Misc. Exp. 21,393 22,463 23,586 24,766 26,004 27,304 28,669 30,103 31,608
Contingency 22,238 36,147 37,839 39,616 41,482 43,441 45,498 47,658 49,926
Operational Costs 244,618 397,615 416,231 435,777 456,300 477,850 500,477 524,236 549,182
Depr. Exp. 125,440 516,990 516,990 516,990 516,990 516,990 0 0 0
Bank Interest Exp 0 640,711 593,907 538,770 473,814 397,291 307,143 200,941 75,828
1,157,70
Non-oper. Costs 125,440 0 1,110,897 1,055,759 990,803 914,281 307,143 200,941 75,828
1,555,31 1,447,10
Total Cost 370,058 5 1,527,127 1,491,536 4 1,392,131 807,620 725,177 625,010
Determination of Working Capital Requirement
From the total investment cost of 8,272,533.97; 66.49% (5,500,000.00 birr) will be utilized for
working capital requirement of the project including its contingencies. The working capital included in
the total capital investment schedule is used for only one year from where the business will get the
bank loan.
Out of the total working capital need of the business, 73% (4,000,000.00 birr) is expected to be filled
from debt equity; the rest 27% (1,500,000.00 birr) is already injected from the promoters own equity.
Hence, the total annual working capital requirement of the project including its direct material
purchase need is presented below.
Description Annual W.C %age Share
Utility Exp. 45,000.00 1.12%
Supplies Exp. 15,000.00 0.37%
Insurance Exp. 3,877.42 0.10%
Fuel & Oil Exp. 160,000.00 3.99%
Wage Exp. 14,000.00 0.35%
Cleaning Exp. 35,000.00 0.87%
Rent Exp. 100,000.00 2.50%
Salary Exp. 164,400.00 4.10%
Repair & Main. Exp. 110,000.00 2.75%
Misc. Exp. 180,000.00 4.49%
Purchases of Direct Material - Spare Parts 860,000.00 21.46%
Purchases of Direct Material - Oil & Grease 530,000.00 13.23%
Purchases of Direct Material - Battery 425,000.00 10.61%
Purchases of Direct Material - Tyre & Inner Tube 680,000.00 16.97%
Purchases of Direct Material - Other Stock 285,000.00 7.11%
Contingency 400,000.00 9.98%
Total Working Capital Required 4,007,277.42 100%
28
Birr 4,007,277.42 (73%) is required for annual operational cost requirement of the project to be
operated at full capacity. Most of the working capital budget 2,780,000.00 (69.37%) will be used for
purchase of several types of direct materials needed for the main business activity as well as other
important spare parts that can be used for the auto parts retail service. 20.64% (827,277.42 birr) is used
to cover the operational costs of the business, while the remaining 9.98% (400,000.00 birr) is used as a
contingency.
Projected Income Statement of the Project

Addisu Shiferaw /Gamel Auto Spare Parts/
Forecasted Profit & Loss Statement of the Project (in Birr)
For the Year Ended XXXX
Description Project Years
Yr 2014 1 2 3 4 5 6 7 8
Sales Income 3,020,850 3,892,935 4,282,229 4,710,451 5,181,496 5,699,646 6,269,611 6,896,572 7,586,229
Other Income 211,151 262,266 301,606 346,847 398,874 458,705 527,511 606,637 697,633
Gross Income 3,232,001 4,155,201 4,583,834 5,057,298 5,580,370 6,158,351 6,797,121 7,503,209 8,283,862
Cost of Goods Sold 2,395,424 2,515,195 2,640,955 2,773,002 2,911,653 3,057,235 3,210,097 3,370,602 3,539,132
Operational costs 218,485 397,615 416,231 435,777 456,300 477,850 500,477 524,236 549,182
Gross Profit 618,092 1,242,391 1,526,649 1,848,519 2,212,417 2,623,266 3,086,547 3,608,372 4,195,548
Depreciation Exp. 125,440 516,990 516,990 516,990 516,990 516,990 0 0 0
Interest Payment 0 640,711 593,907 538,770 473,814 397,291 307,143 200,941 75,828
Non-operational
costs 125,440 1,157,700 1,110,897 1,055,759 990,803 914,281 307,143 200,941 75,828
Profit Before Tax 492,652 84,691 415,752 792,760 1,221,614 1,708,985 2,779,405 3,407,430 4,119,720
Less: Profit Tax 94,900 8,317 79,520 154,922 240,693 338,167 552,251 677,856 820,314
Net Profit 397,752 76,374 336,232 637,838 980,921 1,370,818 2,227,154 2,729,574 3,299,406
Projected Cash Flow Statement
This study applies a decomposition approach of projection of cash inflows and outflows of Gamel
Auto Spare Parts. Cash flows rather than profits are used in financial analysis for the following three
reasons.
 Cash is what ultimately counts; profits are only a guide to cash availability: they cannot actually
be spent.
 Profit measurement is subjective, the time period on which income and expenses are recorded,
and so on, are a matter of judgment.
 Cash is used to pay the term loans and owners equity, owners equity are the ultimate method of
transferring wealth to the project holders as a dividend at the time of official declaration of the
members.
Projected Cash Flow Statement of the Project
Forecasted Cash Flow Statement of the Project (in Birr)
Description Project Years
Yr 2014 1 2 3 4 5 6 7 8
29
Cash Inflow
Beginning 389,246 960,742 4,303,426 3,829,166 3,570,067 3,556,421 3,822,037 4,301,234 5,139,453
Balance
Bank loan - 4,000,000 - - - - - - -
Receivables - 800,000 - - - - - - - -
Equb
Sales Income 3,020,850 3,892,935 4,282,229 4,710,451 5,181,496 5,699,646 6,269,611 6,896,572 7,586,229
Other Income 211,151 262,266 301,606 346,847 398,874 458,705 527,511 606,637 697,633
Total Inflow 4,421,247 9,115,943 8,887,261 8,886,464 9,150,437 9,714,772 10,619,158 11,804,443 13,423,315
Cash Outflow
Investment Costs 480,000 484,800 489,648 494,544 499,490 504,485 509,530 514,625 519,771
Purchase 2,517,120 3,018,234 3,169,146 3,327,603 3,493,983 3,668,682 3,852,116 4,044,722 4,246,958
Operating 218,485 397,615 416,231 435,777 456,300 477,850 500,477 524,236 549,182
Expense
Equb Payables 150,000 - - - - - - - -
Bank Repayment - 903,551 903,551 903,551 903,551 903,551 903,551 903,551 903,551
Tax Payment 94,900 8,317 79,520 154,922 240,693 338,167 552,251 677,856 820,314
Total Outflow 3,460,505 4,812,517 5,058,095 5,316,397 5,594,017 5,892,735 6,317,925 6,664,989 7,039,776
Balance 960,742 4,303,426 3,829,166 3,570,067 3,556,421 3,822,037 4,301,234 5,139,453 6,383,539
Projected Depreciation & Amortization Schedule of the Project
Depreciation & Amortization Expense Schedule
Depreciation & Amortization Schedule
Original Rat Depr. Project Years
Description Value e% Amount 1 2 3 4 5 6-8
Mach., Furn. & Eqpmt’s 184,948 0.2 36,989 36,989 36,989 36,989 36,989 36,989 0
Vehicles 2,400,000 0.2 480,000 480,000 480,000 480,000 480,000 480,000 0
Buildings 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0
Total 2,584,948 516,989 516,989 516,989 516,989 516,989 516,989 0
Projected Balance Sheet of the Project
Forecasted Balance Sheet of the Project (in Birr)
Projected Years
Description 1 2 3 4 5 6 7 8
ASSETS
Current Assets
Cash 4,303,426 3,829,166 3,570,067 3,556,421 3,822,037 4,301,234 5,139,453 6,383,539
Other Current Assets 0 0 0 0 0 0 0 0
Inventory 503,039 528,191 554,600 582,331 611,447 642,019 674,120 707,826
Total Current Assets 4,806,465 4,357,356 4,124,667 4,138,751 4,433,484 4,943,253 5,813,574 7,091,365
Fixed Assets
Building & Civil
Work 0 0 0 0 0 0 0 0
Mach., Furn. &
Eqpmt’s 184,948 184,948 184,948 184,948 184,948 184,948 184,948 184,948
Vehicles 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000
Accu. Depreciation -516,990 -1,033,979 -1,550,969 -2,067,958 -2,584,948 0 0 0
Total Fixed Assets 2,067,958 1,550,969 1,033,979 516,990 0 2,584,948 2,584,948 2,584,948
30
Total Assets 6,874,424 5,908,325 5,158,647 4,655,741 4,433,484 7,528,201 8,398,522 9,676,313
LIABILITIES
Bank Loan 3,737,160 3,427,517 3,062,736 2,632,999 2,126,740 1,530,332 827,722 0
Tax Payable 8,317 79,520 154,922 240,693 338,167 552,251 677,856 820,314
Total Liabilities 3,745,477 3,507,037 3,217,658 2,873,692 2,464,907 2,082,583 1,505,578 820,314
CAPITAL
Owner's Equity 3,052,573 2,065,056 1,303,151 801,128 597,759 3,218,465 4,163,369 5,556,594
Current Year Profit 76,374 336,232 637,838 980,921 1,370,818 2,227,154 2,729,574 3,299,406
Total Capital 3,128,947 2,401,288 1,940,989 1,782,049 1,968,577 5,445,618 6,892,943 8,855,999
Total Liab. + Capital 6,874,424 5,908,325 5,158,647 4,655,741 4,433,484 7,528,201 8,398,522 9,676,313
31
UNIT SIX
Financial Evaluations
Profitability
Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax will be Birr 76,374 at the first year of its operation and at the
end of the project year it will have a profit of birr 3,299,406.
Liquidity
The cash flow projection also shows an incremental cumulative cash balance from Birr 4,303,426 of
the first project year to Birr 6,383,539 of the last projection period implying that the project will not
face liquidity constraint to finance its operational costs and at the same time its debt obligation.
Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of the
firm or a project. Using the year-end balance sheet figures and other relevant data, the most important
ratios such as return on sales which is computed by dividing net income by revenue, return on assets
(operating income divided by assets), return on equity (net profit divided by equity) and return on total
investment (net profit plus interest divided by total investment) has been carried out over the period of
the project life and all the results are found to be satisfactory.
Acid Test Ratios: Is a strength indicator that determines whether a firm has enough short-term assets
to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous
than the working capital ratio, primarily because the working capital ratio allows for the inclusion of
inventory assets. As per the determination of this ratio it shows that the project has an acid test ratio of
1.15 at the beginning of the project year and 7.78 at the end of its projected years.
Debt Ratio: A financial ratio that measures the extent of a company’s or consumer’s leverage. The
debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be
interpreted as the proportion of a company’s assets that are financed by debt.
The higher this ratio, the more leveraged the company and the greater its financial risk. As per this
ratio indicates that at the end of first year the projects debt ratio shows 0.54 and then will decline as
long as the loan is paid regularly, finally at the end of its project life the debt ratio will become zero.
Asset Turnover Ratio: The amount of sales or revenues generated per birr of assets. The Asset
Turnover ratio is an indicator of the efficiency with which a company is deploying its assets.
Generally speaking, the higher the ratio, the better it is, since it implies the company is generating
more revenues per birr of assets. At the first the project will record a 0.39 asset turnover ratio and
finally will reach 0.57 at the end of its project life.
Gross Profit Margin: A financial metric used to assess a firm's financial health by revealing the
proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit
margin serves as the source for paying additional expenses and future savings. This study proves that
the project will amount 0.39 gross profit margins at the beginning and 0.57 at the end of its project
life.
Return on Assets/Return on Investment: An indicator of how profitable a company is relative to its
total assets. ROA gives an idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a
percentage. Sometimes this is referred to as "Return on Investment". The project reaches 0.60 percent
of Return on Asset/Investment at the beginning and finally will reach 0.86 percent of Return on
Assets/Investments at the end of its project life.
Break-even Analysis: The break-even analysis establishes a relationship between operation costs and
revenues. It indicates the level at which costs and revenue are in equilibrium. To this end, the
32
break-even point of the project including cost of finance when it starts to operate at full capacity is
estimated by using income statement projection.
BE = Fixed Cost = 1.68%
Sales – Variable Cost
Ratio Analysis
Ratios Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Sales Growth 29% 10% 10% 10% 10% 10% 10% 10%
Inventory -30.35% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Current
Liabilities -91.24% 856.11% 94.82% 55.36% 40.50% 63.31% 22.74% 21.02%
Long-term
Liabilities 0.00% -8.29% -10.64% -14.03% -19.23% -28.04% -45.91% -100.00%
Gross Margin 39.47% 42.39% 45.17% 47.82% 50.36% 52.77% 55.08% 57.28%
Profit Before
Taxes -82.81% 390.91% 90.68% 54.10% 39.90% 62.63% 22.60% 20.90%
Total Debt to
Total Assets 54.48% 59.36% 62.37% 61.72% 55.60% 27.66% 17.93% 8.48%
Net Profit Margin -420.62% -23.79% 31.68% 53.48% 65.14% 77.53% 80.79% 83.36%
Return on Equity 60.44% 77.58% 98.04% 119.86% 138.91% 90.29% 89.34% 85.61%
Total Asset
Turnover 60% 78% 98% 120% 139% 90% 89% 86%
Debt to Net
Worth 122% 166% 235% 329% 356% 48% 20% 0%
Net Working 4,277,83 3,969,74 3,898,05 4,391,00 5,135,71 6,271,05
Capital 4,798,148 6 5 8 4,095,317 2 8 1
Assets to Sales 165% 129% 102% 83% 72% 111% 112% 117%
Current
Debt/Total Assets 54% 58% 59% 57% 48% 20% 10% 0%
Acid Test 115% 109% 111% 124% 155% 207% 341% 778%
Sales/Net Worth 136% 222% 388% 697% 1030% 211% 180% 149%
Payback Period
The payback period, also called pay–off period is defined as the period required recovering the
original investment outlay through the accumulated net cash flows earned by the project. Accordingly,
based on the projected cash flow it is estimated that the project’s initial investment will be fully
recovered within its project life time.
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UNIT SEVEN
Conclusions & Recommendations
Since the auto spare parts and motor economic sector in Ethiopia is in a low level progress, growth and
improvement of the sector can substantially contribute to the economic development at regional &
national level. The promoter believes that, the business will contribute its own part to the auto spare
parts sales economic sector. Potential of the sector will confirm sustainability of the firm’s growth &
development.
By investment in advanced technologies, standardized machineries and equipments and by
implementing codes of conducts of the town and regional government as well as international
standards for the sector more added values can be generated to the marketing system of the nation as a
whole.
As shown in the above analysis, the project will pay back its debt equity within eight years as per the
scheduled time table. Create a job opportunity for not less than 6 permanent residents of Bishoftu
town. Contribute to the government significant revenue in the form of income tax and VAT.
Therefore, the project is beneficial both for the owner, residents of Bishoftu town, the town
administration and the regional government as a whole.
Hence this study believes and recommends that financing the project of Ato Addisu Shiferaw and
replying the requests of the promoter has a great impact for the development of the town and will have
a direct and indirect positive effect on the project owner’s wealth, the development and renaissance of
the region and the country as a whole.
The bank will also be profitable from the loan it injects to this project by generating an interest of
3,228,404.48 within the project loan period.
 This business study believes that, Ato Addisu Shiferaw will contribute his own part to the
modern plus standardized auto spare part distribution and selling service sector.
 In addition to supply of the domestic needs of standardized auto parts and narrow the gap, the
project will generate birr 2,872,040 in terms of profit tax revenue & more than 2,894,670.30 birr
in the form of VAT for the government within the projected years of time. Moreover, the
Regional Government can collect Employment Income tax and Pension tax revenues.
 The financial analysis confirms sustainability of the firm’s growth and development.
 Loan should be obtained in order to manage the cash flow during the construction period. The
loan would cover only 48% of the project total investment and therefore pre-finance request from
the project owners shall be presented to the bank on time.
 Bishoftu Town Administration Office should assist the project in order to make visible the
promoter’s vision & mission.
 The Investment agency of the town should also give a hand to the project by issuing the
Investment license and paves the way to facilitate duty free privileges to the promoters on time.
 The strong management capacity is one of the main aspects to accelerate the process of acting
according to business plan indicators.
 In order to increase loyalty of employees and other stakeholders towards the projects aim and
goal, the communication flow shall be strengthened. Loyalty and membership feeling within the
stakeholders is important aspects to increase accountability and responsibility of employees.
As a result this study believes that financing this project will have a direct and indirect positive effect
on Ato Addisu’s wealth, the residents lived in Bishoftu town, other stakeholders and yet the project
will have a great impact to the development and renaissance of the country as a whole.
34

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Business Plan on Gamel Auto Spare Part

Description Yr 2011 Yr 2012 Yr 2013 Yr 2014

Market/Supply & Demand Analysis

Projected Demand Forecast

Tyre & Batteries 88 97 107 118 130 143 157 173

The project will have:

Sales Person Accountant Store Keeper Non-Clericals

Yr 2014 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Projected Income Statement of the Project

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